Starting point for filling out a personal tax return in 2014
In Australia tax returns cover the financial year that runs from 1 July to 30 June, and personal tax returns can be lodged with the Australian Tax Office (ATO) either electronically, using an online application process, or by submitting a paper tax return and individual tax return instructions. Tax returns have to be submitted by 31 October each year, unless you use a registered tax agent to prepare your return. Those can usually be lodged later than the end of October – your tax agent or accountant should be able to inform you of this date.
The starting point of this whole process is making sure that you have got all your relevant information pertaining to your assessable income up to date and accurate. If you haven’t already done so, make sure that your payment slips and income details are filed in date order, and that you log and number any receipts for expenses or payments that can reduce your assessable income. Scan these documents, keeping them in a secure file on your computer. You won’t be asked to send in your receipts or documents with your tax return unless the ATO request these, but it will make filing your tax return a lot easier. Do also check to see if you have to lodge a tax return, most people do but there are a few exceptions. Generally if you’ve had any tax taken from payments made to you (and this includes working holidaymakers paid a wage in Australia) then you almost certainly have to lodge a return or face penalties.
Next you’ll need to set aside time to focus on your tax submission or you can get tax professionals to help with this process in order to save time and ensure an accurate return. You should also decide whether you are going to lodge your return online or via paper. If you are lodging online and using e-tax, the ATO has a downloadable app that can assist you in this process, and there are step by step guides to electronic submissions on their website. Then start gathering the relevant documents.
Whom to speak to for advice
There is a lot of help and advice available these days both online and by talking to income tax professionals, but it is important that you deal with experienced and qualified tax agents as well as the ATO. Tax professionals can save you a lot of time and effort, and ensure that the tax return you make is complete and that it accurately reflects your assessable income. If you hold a number of superannuation accounts or have additional income from stocks, shares or investment property, they can help you maximise your tax return to ensure you pay only the taxation that you owe.
Income tax professionals should be the people to consult prior to lodging your return as they can accurately review your gross income, from the financial records you provide, and advise you on any pre-tax adjustments you can legitimately claim. For advice on reducing your assessable income prior to lodging your tax return, independent tax agents and accountants are an invaluable source of advice and help. They will also submit the tax return on your behalf, which can reduce a lot of the time and effort you would have to put in without their help. Most taxation professionals also have online information and advice, with comprehensive question and answer forums for further support and guidance.
The ATO has a very comprehensive website with step-by-step checklists and downloadable forms for those preparing to submit a personal tax return. E-tax apps are available for download, and if you need to get a tax file number then you can do this online as well plus update any of your personal details. If you are submitting a paper return, which many Australians still prefer, then you can contact the ATO for guidance and/or order a form or publication to help you through this process. Their website is www.ato.gov.au.
Finally if you do have a complaint about any of the processes that the ATO undertakes, there is an Ombudsman created to focus on the investigation of complaints about the ATO. The Commonwealth Ombudsman is also the Taxation Ombudsman, and works cooperatively with the Auditor-General and Inspector-General of Taxation on all matters pertaining to taxation in Australia. They can be contacted via their website www.ombudsman.gov.au, in person or by telephone on 1300 362 072 (local call charge; calls from mobile phones at mobile phone rates).
Documents required for personal tax return (including supporting paperwork)
There are a number of pertinent documents that you will need as evidence of your assessable income when submitting your personal income tax return, namely:
• Financial records
• Payment summaries
• Tax file number
• Supporting documentation
• Schedules
Financial records and documents are needed in order to work out just how much to enter within each part of your income tax return for 2014. Even if you use tax agents or accountants, they are still going to need this information to work from, and this includes those on a lower income who might be getting help from a Tax Help volunteer. It is also really important that you have records of your superannuation fund, and if you have more than one super account, or if you have moved or changed your name (e.g. through marriage), you will need to ensure that you have details of your super accounts for the financial year in which you are doing your return. You can register online with the ATO to keep track of your superannuation funds or speak with your income tax professional who will advise you on this process.
Payment summaries should have been issued to you by each employer you gained your income from during the tax year, as well as other payers, and these should show the amount of tax that was held back and what monies were paid to you. Summaries of payments from banks and other finance organisations that show any interest earned, dividend statements and summaries from companies must also be retained, ready for submission of your tax return. If you receive income from other properties then a record of the payments made to you by tenants must be retained along with details of any purchases or payments made for equipment or assets. Note that if you do purchase a capital asset (shares, property, managed fund investment), you’ll have to start keeping records straightaway because if you sell your asset sometime in the future you may be liable for Capital Gains Tax.
Ensure you have your tax file number on hand, because if you don’t have one, you will need to apply for one. If you have lost yours, then make sure you contact the ATO or your tax agents (if you have used them previously) to check whether you have a record of it. Remember that you must keep your financial records for at least five years in case the ATO, yourself or your tax agents need to refer to them later on.
Supporting documentation is also very important. If you are submitting information about asset purchases and sales then you do need to keep valid receipts, invoices and purchase orders. You will also need copies of any contracts that show outgoing and incoming funds, as well as tenant and rental records. If you are claiming work-related expenses, mileage or, for example, laundering costs for uniforms that are $300 or more, you do need written evidence for the total amount to prove your claim.
If you regularly contribute to a registered charity, have made donations or gifted money, then you need to keep records of this transaction. Receipts for contributions or donations, or a signed letter from the organisation you donated or gifted money to, along with the amount and the date, should be kept ready for your return. Medical expenses, statements from health funds or Medicare, or payments made to residential care homes that relate to medical expenses should be kept so that you can accurately record your outgoing expenses that are tax deductible. Dental bills, opticians’ and chemists’ costs, and hospital payments that refer to you and your immediate dependents should be retained, and if you are responsible for the care and welfare of others, then ensure you have records and receipts pertaining to them.
You may also have to complete what is called a schedule, depending on your individual circumstances, and forms are available via the ATO website or your tax agent that will ensure the correct schedules are completed. The circumstances under which you will need additional documentation are as follows:
1. If you have received more than the one superannuation lump sum during the financial year;
2. If you have got more than one employment termination payment during the financial year;
3. If you have received any of the following payment summaries:
- Foreign resident withholding
- Withholding where ABN not quoted
- Voluntary agreement
- Labour hire and other specified payments
In the above cases, for (1) complete the Employment Termination Payment Schedule;
for (2) the Superannuation Lump Sum Schedule; and for (3) the Individual Pay as You Go (PAYG) Payment Summary Schedule.
The timeline for submission of your personal tax return
Taxpayers have the period from 1 July until 31 October in which to lodge their personal tax returns. If you are using an income tax accountant, then you might be eligible for an extension of this period, and your accountant will advise you on this. If you are awaiting a tax refund and you miss the July to October period because you need the refund amount to complete your return, you might not get a penalty unless the ATO has requested an earlier return. However, if you are subject to a tax liability with the ATO then get the return in within the required period because otherwise you could face a potential penalty.
Implications if the deadline is missed
If you miss the deadline the ATO may give you a “failure to lodge on time” or FTL penalty because of the late return, but if you lodge it voluntarily and it doesn’t result in you having to pay any tax, their policy is to not penalise. They are much more likely to penalise you if this is a reoccurring incident and you have a poor history of lodging your taxes. Also, if you have more than one tax return outstanding or if you haven’t complied with a request from the tax office to lodge your tax return then you are likely to be penalised.
An FTL penalty can be applied on overdue documents or on those that are lodged late, and it is calculated at a rate of one penalty unit ($170 since 28 December 2012) for each 28-day period (or part period) in which the required documentation is overdue. This is up to a maximum of 5 penalty units, i.e. 5 x $170, but size tests also apply so if you are classed as a medium entity then the penalty amount can be multiplied by a factor of 2, and large entities by a factor of 5. (This penalty payment cannot be lodged in the following year’s return as a tax deduction either!) However if you miss the deadline by only a few days through no fault of your own, such as because of verifiable postal delays or unexpected transmission delays, then the ATO does take this into account.
For peace of mind and assurance in getting your tax return completed in an accurate and timely manner, it is worth reviewing the use of an experienced income tax accountant and tax professional, of which there are several in the Brisbane, Gold Coast and Cairns area.
ITP QLD has been serving Australians for more than 35 years and pride themselves for reliable, quick, attentive and reasonably-priced services. Their fee is only based on the amount of detail included in your tax return. So if you had thought you couldn’t afford a professional income tax accountant, think again. Check out their website for more information.
Wednesday, May 28, 2014
Monday, May 26, 2014
Problems in getting a home loan and how to overcome them
If you have had your request for a loan declined, then it is imperative not to rush off to another lender and submit your application straightaway. You need to take a little time and review why you didn’t get the loan, so contact the company who declined your loan and ask them why. It could be that you didn’t supply them with the correct information or you missed something out; either way take time to carefully prepare your loan application before either resubmitting or trying to apply elsewhere.
Ideally take note of the issues presented below before deciding to put in for a home loan and give yourself time to ensure you cover all the possible obstacles that can crop up.
(Also note that if you are a first time buyer then make sure that you choose the right loan suited to your needs and requirements; there are loans specifically for first timers and their guidelines can be different from the ones other borrowers have to meet.)
Main challenges faced by home loan borrowers
• Funding issues
• Servicing issues
• Property issues
Funding issues
Lenders will require security and collateral against your home loan so make sure that not only can you show you have savings to cover the deposit, but that you have made a full and accurate list of any assets you hold. It is important that before seeking a home loan you can demonstrate that you have saved for a genuine 5% deposit, which means ensuring you can provide the lender with a history of your saving activity. Another reason that you can be turned down for home loans is if you cannot show you can supply sufficient funds that will cover 15% of the value of the property you are buying or at least a 10% deposit for new purchases.
Ways of overcoming these issues
Bank statements, savings bonds or a demonstrable savings plan will go a long way towards proving that you are a worthwhile and relatively risk free option for a lender. Try to avoid any major purchases before closing on your home loan as this could lead lenders to become concerned you won’t have the funds to cover repayments. Also make sure that you have prepared a forecast budget so that you can show what the demands on your income will be and that you can cover repayments as well as have something put aside for any emergency bills.
Servicing issues
If you do not have a steady income, or if you have just started work and cannot show at least 3 months’ worth of payslips, then you could find it difficult to get your home loans application accepted. Changes in employment, with employers extending probationary periods from one to three months and up to six months, can also have an impact on your application. If you have just started your own business and cannot demonstrate your tax returns for the last two years and accounts for your trading business, then this can present a difficulty. Lenders will also look at your credit card and store loans as part of your credit history, so if you have a poor credit rating this will certainly affect their decision to lend.
Ways of overcoming these issues
If at all possible try not to make big career changes before applying for your home loan; sometimes this is not possible as with a new job you may have to relocate, but lenders do weigh the stability of your employment. However this may just delay your application until it can be proven that your new work role is going to be a stable position and that you can repay the monthly loan instalments. The same goes for those who wish to become self-employed, and it might be prudent to ensure you can demonstrate you have enough funds from your business before taking out a loan. (You also need to note that lenders take the gross before-tax figure rather than net after-tax figure, which is minus deductions and expenses if you are self-employed).
If you do have credit cards with money owing on them, you might want to consider debt consolidation, which will help present your case in a better light to lenders. If you have cards that you are not using, cancel them or reduce their limit before presenting your loan application, and check your credit file at least 30 days before the application goes in.
Property issues
Prior to buying the property, make sure that you have done your homework and ensured that there aren’t any structural problems that will cost a lot to put right, and that the purchase price of the property is a true reflection of its value. Usually the home loans lenders will need a proper evaluation by a registered valuer so be prepared for this to happen. Ways of overcoming these issues Do some research yourself before putting in your loan application by checking the prices of similar properties sold over the last few months. Also ensure that you have had a structural inspection and gotten some information about the locality of the property. If you buy somewhere and find out a four lane highway is going to be built alongside it, then the value of the property will diminish, so it is worth checking out planning applications and so on at your local council offices.
Final thoughts
Take your time and get organised before you submit your application, and make sure that your application is presented to just one lender at a time. If you are asked for further information and evidence then get it to the lender as soon as possible, and make a list of questions to ask them if you don’t understand anything. Ask if the loan will require mortgage insurance as well and present all your information in a professional and accurate manner – your credibility is on the line as well as your credit rating.
Whether you are purchasing your first home, or the second and third, Westminster National based in Perth, Australia has over 30 years of experience in property finance with consultants who are fully accredited with the Mortgage and Finance Association of Australia (MFAA). With access to over 20 lenders across the country, Westminster National have the capacity to source competitive deals that are tailored to clients’ individual needs. Click here for more information.
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